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Entrereneurship 1.44
Entrereneurship 1.44
Accounting
Is the process or recording financial transactions
pertaining to a business. The accounting process
includes summarizing, analyzing, and reporting these
transactions to oversight agencies regulations, and tax
collected entities.
Accounting Equation
Assets = Liabilities + Owner′
Equity
Elements of Financial Statements
1. Assets
2. Liabilities
3. Capital
4. Revenue or Income
5. Expenses
ASSETS - are defined as resources
controlled by the enterprise as a result of
past transactions and from which future
economic benefits are expected to flow to
the enterprise. Assets are properties
owned by the business.
Kinds of Assets
Current Assets - represent all the assets of
a company that are expected to be
conveniently sold, consumed, used, or
exhausted through standard business
operations with one year.
Current Assets includes:
⮚ Cash
⮚ Accounts Receivable
⮚ Notes receivables
⮚ Merchandise inventory
⮚ Office Supplies
⮚ Store Supplies
⮚ Prepaid expenses
Fixed Assets – also known as tangible
assets or property, plant and equipment ,
is a term used in accounting for assets and
property that cannot easily be converted
into cash.
Fixed Assets includes:
⮚ Office equipment
⮚ Store equipment
⮚ Furniture and Fixtures
⮚ Automobiles
⮚ Machineries
⮚ Land
⮚ Building
Examples of Assets
Cash - is any medium of exchane that a bank
will accept at face value. It includes coins and
currencies, checks, money orders and bank
drafts.
Accounts receivable - are claims against
debtors or customers arising from services
rendered and sale of merchandise on account.
Notes Receivable - are claims supported by
promissory note.
Merchandise Inventory - are goods on hand and
are available for sale.
Prepaid Expenses - expenses paid in advance,
benefits of w/c are not yet received. Examples:
six months rent paid in advance(prepaid rent) or
one year insurance paid in advance (prepaid
insurance) prepaid interest, prepaid taxes, etc.
Land - is the site where the building is
constructed. Although located on the
same site, they should be accounted
separately.
Buildings - is the construction on the land.
Equipment - generally is made of steel.
This includes computers, xerox machines,
laptops, filling cabinets etc.
Furniture and Fixtures - generallly is made
of wood. Examples cabinets, tables, chairs,
dividers and the like.
Vehicles - used in business operation for
transporting goods and services.
LIABILITIES- are defined as debts or
obligations of an enterprise arising from past
transactions or events, the settlement of which is
expected to result in an outflow from the
enterprise of resources embodying economic
benefits.
Examples of Liabilities
Accounts Payable - these are amounts due
to creditors.
Notes payable - are amounts due to
creditors evidenced by written promise to
pay.
Mortgage Payable - are long-term debts
secured by a mortgage or real properties.
Unearned Revenue - revenue collected by
the business in advance.
Acurred Expenses – expenses already
incurred but not yet paid.
CAPITAL – represents equity or claim of the owner on
the aasets of the business
Example:
Owner′s Capital
Owner′s Drawing or Owner′s Withdrawal
REVENUE OR INCOME - is the gross inflow
of economic benefits during the period in the
form of inflows or enhancements on assets or
decrease in liabilities that result in increase in
equity, other than those relating to contributions
from the owner or owners
Examples of Revenue
✔ sales
✔ Interest Income
✔ Service Income
✔ Fees Earned
✔ Professional Fees
✔ Rent Income
EXPENSES - is defined as the gross
outflow of economic benefits during the
period in the course of ordinary activities
when these outflows result in decrease in
equity other than those relating to
distribution to owners
Examples of Expenses
❑ Salaries and Wages Expenses
❑ Taxes and Licenses Expense
❑ Rent Expense
❑ Advertising Expense
❑ Insurance Expense
❑ Transportation Expense
❑ Supplies Expense
❑ Utilities Expense
❑ Repair & Maintenance Expense
❑ Gas & Oil Expense
❑ Miscellaneous Expense
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